7 Genius Ways to Invest $5,000

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1. Tackle high-interest debt

“From a strictly financial standpoint, if you have high-interest credit card debt, it makes sense to pay it down,” said Ben Huber, a financial expert and co-owner of financial education website DollarSprout.

According to Huber, it’s important to look at how much interest you’re paying right now in relation to your potential returns. Paying off debt with a 15.99% APR results in a better return than investing in something that might only give you between 5% and 7% in annual returns.

2. Beef up your retirement account

Rich Guerrini, president and CEO of PNC Investments, suggested using the money to grow your wealth in a tax-advantaged retirement account. If you haven’t maxed out your contributions, investing that $5,000 into your 401(k) or an individual retirement account (IRA) today can make a big difference down the road.

“On top of that, many employers will match a portion of your contribution to a 401(k), helping it make even more of an impact on your retirement well-being,” Guerrini said.

With highly rated borrowers, she said, you won’t see the same return, since these are “safer” bets — more likely to repay their loans. But Baker can boost her returns by including some loans to those with riskier credit profiles.

“I can diversify that $5,000 into 100 loans of $50 each, or 50 loans of $100, with different levels of risk,” Baker said. “And I get to help other people at the same time.”

4. Get into the rental game

“You can invest $5,000 as a down payment for a property that has the capability for you to rent out spare rooms or an apartment,” said Elizabeth Colegrove, a real estate investor and founder of The Reluctant Landlord.

Colegrove recommended using a Federal Housing Administration (FHA) loan to get started since you can get approved with a down payment as low as 3.5%, allowing for the purchase of a property that costs up to $142,857. You do have to live in the property for at least one year when you get an FHA loan, so you’ll have to account for that in your planning.

“Try to diversify the rentals if you can,” said Colegrove. “Use some of it for Airbnb and some for long term. Your renters are paying the mortgage, freeing up your money to keep investing or use the money for other things.”

5. Boost your business

Claudia Pennington and her husband, Garrett, run DIY Marketing, consulting with other business owners to help them move to the next level. When they were trying to figure out how to invest $5,000, they settled on using the money to produce a marketing video for their business.

“We think it will help us grow, providing returns beyond our initial investment,” said Pennington. “Plus, every dollar we invest now can mean another $3 or $4 in returns when we go to sell the business in a few years.”

Pennington recommended looking at your business and seeing where you could invest a little more to see results.

Targeted marketing plans, new equipment, or getting a virtual assistant are all ways you can tweak your business to free up your time to focus on growing your income more effectively.

7. Invest in the future

“There is no better time than the present to invest in your child’s education,” said Guerrini. He pointed out that the recent tax law expanded the purpose of 529 plans to include expenses at private schools for grades K-12 besides college.

How to invest $5,000 — and grow your wealth

How you decide to invest $5,000 depends on your long-term goals. Stop and think about where that money could do the most for your finances, whether that’s paying down high-interest debt, putting the money into real estate, or even investing in yourself or your business.

There are so many ways to use the money, but investing it in a way that provides returns or helps free up other funds to help you reach your goals is much more satisfying than blowing it on consumer items that only lose value.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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